Debt from short term loans quadrupled in past 2 years

According to one debt advisory service, debt levels from short term loans has increased by a factor of four over the past two years.

Small-scale, short term unsecured loans, sometimes called short term loans, are designed to hold people over until they receive their next salary payment.  However, it may be too easy to get approved for such small loans, according to the Citizens Advice Bureau, which has called for tighter regulations on the industry.

However, Ed Davey, Consumer Minister, has said that pushing for more stringent measures could result in those in need being pushed into the clutches of illegal loan sharks.  This could have a serious impact on many, as a large number of people use short term loans as a legal, efficient, and quick way of obtaining sorely needed credit in the shorter term

While many detractors of short term loans are critical of high interest rates, if the loan is repaid in a timely manner by the borrower’s next pay day, this form or lending can actually be less expensive than paying a credit card charge or an unauthorised overdraft fee.  However, debts can escalate very quickly if the loans are dolled over, as some firms charge more than 4,000 per cent in interest rates.

Citizens Advice Bureau spokesman, Peter Tutton, remarked that ministers need to take action quickly in order to protect people, as the current regulatory regime is not doing so properly.  Mr Tutton said that the government needs to take a serious look at the effectiveness of consumer credit, as consumers need to send a message to companies that it is simply unacceptable to treat their customers in such a terrible manner.

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